The Virtues of Value
Apr 13, 2017
By Alison Yama
Today’s managers have access to more information regarding purchase decisions and history, customer demographics, volumes, timing, buying center, and the list goes on. No doubt, this type of information at your fingertips helps managers and salespeople make better decisions.
However, in the face of tough negotiations, sometimes the data and spreadsheets fall short in helping sales develop the backbone they need to protect price from unnecessary discounting. The reason is because all of this information is based on historical purchasing patterns and pricing. This doesn’t account for how prices are negotiated and if they folded on price too quickly or too much, leaving money on the table.
There are a few dangerous assumptions when using data solely to determine future pricing and negotiations:
- Business changes quickly. Prior negotiations may not indicate future behaviors in negotiations. There is one exception – once a customer gets an unexplained discount, they will come back for more.
- There is a group of buyers out there that are bluffing their way to lower prices.
Understanding the financial value your products and services create for customers is the most important forward-looking capability to build confidence and hold the line on price during negotiations. Value equates to the revenue gain or cost savings a customer can bank on in the future, if they buy your product versus the competitor. It is the most defensible with customers, because the information comes from the customer themselves. It is also the most versatile in negotiations: If they don’t want to pay the price, you take away some of the value in the offer. This either calls the bluff of the poker playing customer or makes price/value tradeoffs for a value buyer. Lastly, value keeps you connected and invested in the future performance of a customer’s business. What could be more important than that?